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Relocation and Total Rewards: Where's the Fit?

The consulting firm of Gartner, Inc., defines Total Rewards as “the combination of benefits, compensation and rewards that employees receive from their organizations. This can include wages and bonuses as well as recognition, workplace flexibility and career opportunities.” Some phrases associated with Total Rewards are “Enhancing the employee experience” and “Employee well-being support”.

 

To the latter, Harvard University offers “6 Management Tips for Supporting Employee Wellbeing at Work”. What’s missing, though, are tips on supporting well-being when the employee relocates for a new position, despite the fact that moving can be one of the most stressful events in a person’s life.

 

There was a time when most companies entered into direct-bill relationships with well-vetted relocation providers who placed a high premium on quality service as their means of preserving account relationships. Today, though, lump-sum packages have permeated the space. A check is cut to cover what the company believes to be a reasonable moving expense, and the rest is up to the employee. This makes a world of sense to CFOs looking to control costs and placate shareholders, and to HR departments looking to avoid the distracting minutiae of employee relocations. The employees themselves, however, left to their own devices to roll the dice on service providers, often take an unwelcome adventure en route to their new positions. 

 

Horror stories abound:

 

·        The truck drove away six weeks ago, there’s no delivery date, and no one at the moving company is answering the phone.

·        The truck showed up, but the movers broke or damaged half the furniture, the claims process is stalled, and no straight answers are forthcoming.

·        The bill came in much higher than estimated, and between that and the cost of temporary accommodations, the employee’s move allowance has been blown to smithereens.

·        The Realtor back in the origin city has priced the home improperly, with the employee’s family staying behind until it sells, extending the temp housing stay and delaying the purchase of new property.

 

From where we as relocation professionals sit, we see a disconnect with the spirit of Total Rewards. “There’s a great job with excellent benefits and opportunities waiting for you on the other side of this swamp. Mind the alligators, and remember, this is all taxable.”

 

With all of the pitfalls awaiting relocating employees who’ve made decisions about their move without expert guidance, it’s fair to wonder how engaged some are upon arrival in a new city, in a new position, with a new workplace to adjust to when they’re busy during business hours dealing with the fallout of a move gone bad.

 

Given that relocation management companies (RMCs), with their rosters of vetted suppliers and a firm grasp on how to make a move go as seamlessly as possible, exist primarily to mitigate the risks involved with moving – often for no fees above what the move actually costs – why are they not given a seat at the Total Rewards table? To find out, we spoke to two leaders in Human Resources consulting: Dr. Janet Walsh, CEO and President of Birchtree Global; and Jil Galloway, respected consultant with JJG HR Consulting, Ltd.

 

To Dr. Walsh, it comes down to breadth of experience. “Companies without experience in global tax and HR may establish a fixed compensation amount for global relocation in the interest of cost containment and ease of administration,” she tells us. “However, this approach overlooks the significant, negative tax implications to the relocating employee and company along with the resulting negative employee morale and lower assignment ROI.” While the lump sum approach looks good on balance sheets, in other words, it overlooks the long term costs that can in fact be more financially destructive to the company over the long term.

 

Lastly, Dr. Walsh points out that “Relocation costs are minimized by understanding tax implications for both the employee and the company. Costs are significantly reduced using strategies like pre/post paying bonuses, incentives, and expenses; utilizing totalization agreements; and tax equalization strategies.” This last point is important, as it’s often overlooked. Once tax has been paid on the move allowance, the employee has netted only a percentage of the original package!

 

Ms. Galloway, who spent her professional career with a large global company, knows this situation all too well. While the company’s international relocation program was a smooth-running machine, complaints from employees who were at a loss as to how to string all of the elements together and do damage control in the midst of doing their jobs. In short, Human Resources departments would do well to place a greater emphasis on the degree to which they understand the employee’s perspective.

 

Why, then, are relocation packages not included in Total Rewards programs? Ms. Galloway puts it succinctly: Total Rewards programs are designed to include everyone in the company, and not everyone in the company moves.

 

Fair enough. HR leaders should nevertheless consider extending the spirit of Total Rewards to their relocation policy as a means of enhancing the employee experience for those most exposed to risk as they start new chapters in their careers. While the ideal solution is an HR-directed relationship with an RMC to lift the burdens of move coordination and tax ramifications from the employee, we know lump-sum benefits are here to stay. Even so, simply referring employees to an RMC, encouraging them to utilize its time-tested suppliers, and allowing its consultants to advocate for them in the event of trouble can reduce the stress of moving by orders of magnitude. At that point, the “total reward” is a seamless and forward-focused transition.

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